5 easy steps to becoming a 'financial adult' by the end of the month


Growing your money is hard. Especially if you're broke, in your first job and feel like financial success is but a distant dream. Having an actual plan and making responsible investments — let alone any investments — can seem like an impossibly "adult" task to undertake. 

Yes, you should be careful about dipping your toes into stock market investing, but millennials should not be too afraid of the "I" word — especially since most have some serious catching up to do when it comes to saving money in accounts like 401(k)s or IRAs. Research suggests even more responsible young savers need to be saving a whole lot more than they are for retirement.

The good news? It's not actually that hard to turn your ship around and embrace "financial adulting" to make your money work for you even if you don't have a lot of it yet. 

Here are five steps to get you on the right track. You could easily knock these out within four weeks, to become a financial grown-up by month's end!

1. Track your spending and start a budget

If you don't know where your money is going, it's difficult to identify where you are overspending or if you have sneaky expenses that make achieving your goals harder. If you do know where your money is going, you're in the minority.

Just 40% of adults have a budget and clear idea of what they spend, according to a 2016 survey from the National Foundation for Credit Counseling. 

What that means is nearly half of people, and not just young people, might be spending a lot more on faux "essentials" — like those gluten-free chocolate dusted macadamia nuts — than they realize. Actually making a budget is the best way to root these little problem expenses out. 

Still unconvinced? While 46% of those surveyed adults claimed to have a "somewhat good idea" of how much they spend on food, housing and entertainment, many might be wrong: "Financial advisers who press clients to tally their spending say the numbers are often at least 20% higher than the individuals had thought," the Wall Street Journal found in a separate report.

The good news is tracking apps can make it simpler than ever before to determine where your money is going — and typing up a simple monthly budget in a spreadsheet takes about five minutes. Popular tracking apps include Realbyte Inc's Money Manager Expense & Budget and Halcyon Mobile Inc.'s Dollarbird. If you want to DIY with Excel or Google spreadsheets, start simple: Begin by tracking your spending for 30 days, suggests Simple.

Once you have an idea of how you're currently allocating your cash, use a budget to cut down waste and save for goals. This five-minute guide to creating a budget will walk you through the whole process.

2. Improve your credit score

A high credit score truly says you've arrived as a financial adult. You'll need good credit throughout life to get the best deals on home loans, car loans and other borrowing. Start working on it now, because it takes time to build credit

First, make sure you understand what goes into a credit score, which is based on payment history, amount of available credit being used, age of accounts, inquiries lenders make when you apply for credit, and "mix" of credit. 

Paying down debt is a great way to boost your score: If you need motivation, focus first on smaller debts first — commonly known as the "snowball method," — which helps you build momentum. But if some of your debts have far higher interest rates, you may want to start with them: aka the "avalanche" method. You can also lower utilization rates by asking your creditor to raise your credit limit, so the amount you charge will be a smaller percentage of available credit.

Refinancing student loans can also make repayment easier if you can lower your interest rate — so more of your cash goes towards paying down the balance. But beware of certain drawbacks to refinancing, especially if you hold federal loans, which offer protections that private loans will not.

Finally, know that you can improve your credit score even if you don't currently have a credit card: Here is Mic's guide. But, in general, credit cards (used responsibly) are a great way to build credit history,

3. Ban impulse buys with a 24-hour rule 

You already made a budget, so you know how much money you can afford to spend on fun. Still, this doesn't mean you want to waste your cash on impulse buys — or spend unconsciously on stuff you will regret. 

A solution? Institute a 24-hour waiting period for discretionary purchases. After all, "there aren't many things we truly can't live without and waiting ... will help you avoid shopping hangover," as Bankrate suggests. That's a smart way to fight the harmful psychology of short-term reward-seeking.

A twist on the 24-hour rule to consider: Wait 24-hours for every $100 you plan to spend. If you're buying something that costs $400, this means you should take four days to research and comparison shop before pulling the trigger.

4. Open these specific accounts

You've probably heard that you need an emergency fund with enough savings to cover three to six months of spending. This fund can provide for your needs in case of a job loss or unexpected expense. If you don't already have an account where you save for emergencies, you need one.

But it's also vital to have retirement savings. In fact, you may want to open multiple accounts — say, through work and on your own — to save enough to retire comfortably. This five-minute guide explains what you need to know about the different retirement savings options you have.

It's also a good idea to have short and long-term savings accounts for other goals as well: for an awesome vacation, a big purchase or buying a house. Research suggests that visualizing your savings goals can help motivate you to stash away more — as can naming your account. So you might literally rename it "wedding fund" or "dream car account."

Here's a simple guide to the only five accounts you really need.

5. Automate all saving and investing 

Make the robots do the hard work! Automating your financial life is a great way to trick your brain into being more financially savvy. It's easy and smart to have your employer put a portion of your paychecks directly into your 401(k). It's similarly simple to set up automated bill pay and to set an automatic transfer into your savings accounts and IRA each month. 

Personal finance experts like to call this "paying yourself first" — because future-you is getting paid before rent, cable and other bills come along. That can feel pretty empowering. 

You can automate an employer-provided account like your 401(k) easily by calling HR. Automating your IRA may require an extra step or two, but the payoff could be big: A full 91% of IRA owners report feeling confident about their retirement goals, according to one study.

Auto payments for bills can be set up through the company that provides the services such as your credit card company or you can tell your bank to send automated monthly payments by using your bank's "bill pay" features.

Long story short, financial adulting is easy to master: Just set it and forget it.

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